New inquiry boost to Equitable victims

Equitable Life policyholders battling for £3 billion in compensation received a huge boost today when an investigation into the affair was reopened.

Parliamentary Ombudsman Ann Abraham said she was looking again at the financial collapse of the blue-chip firm that left more than 350,000 people out of pocket.

In a decision that could create political problems for the Treasury, the remit of Ms Abraham's inquiry will include the role played by the Government Actuaries Department - a move urged by policyholders and MPs.

Ms Abraham investigated the regulation of Equitable by the Financial-Services Authority, but found no evidence of maladministration.

Equitable was plunged into difficulties after losing a Lords ruling over the rights of its guaranteed annuity rate policyholders, leaving it with a £1.5 billion liability and forcing it to close to new business.

The value of endowments plummeted, leaving victims unable to keep up with mortgages or other loan repayments. Many policyholders decided to cut their losses and pull out of Equitable but others held on until it finally collapsed in 2001. A recent report by judge Lord Penrose concluded that, while the regulatory system had failed policyholders, the society was the "author of its own misfortunes".

A recommendation for Government redress by the Parliamentary Ombudsman now represents policyholders' best chance of getting compensation, after the society decided not to pursue the Government for compensation itself.

Liberal Democrat economics spokesman Vince Cable welcomed the reopening of the inquiry but he warned that policyholders did not want a repeat of the two-and-a-half year wait suffered over the Penrose inquiry.